Group Selling In Groupon After Hours

At last check, one of the final remnants of the second coming of the dot com bubble was trading down 15% after hours following its Q2 earnings report which while beating on the bottom line at $0.08/share (including a one time $0.04 gain) on expectations of $0.03, missed the top line forecast of $575 MM, instead reporting $568.3 MM in revenues. Also spooking the market is the company's Q3 revenue forecast of $580MM - $620MM vs estimates of $607.4 MM. Company also adds that "income from operations for the third quarter 2012 is expected to be between $15 million and $35 million, compared with a loss from operations of $0.2 million in the third quarter 2011." Considering the market cap is just shy of $5 billion one may be excused to ask just how the company will grow its net income to anything remotely resembling a rational valuation, even when taking that company's $1.2 billion cash, all of its as a result of fundraising. Finally, what would a GRPN release be without the now traditional recasting, adjusting, and otherwise proformaing of some historical core line times. Sure enough: "The second quarter 2012 marked the first time that direct revenue was material to the Company’s consolidated performance. As a result, beginning in the second quarter 2012, third party and other and direct revenue are presented separately. Third party revenue is related to the sales for which the company acts as an agent for the merchant. This revenue is recorded on a net basis. Direct revenue is related to the sale of products for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory recorded in cost of revenue." Uh... Ok. Have fun with that.

"Groupon’s business model is that of a very big, very greedy middleman — and a very, very big overhead to small businesses who look to recruit new customers. Do middlemen create value? No — they parasitise both the consumer and the producer.

What is clear is that growth will eventually hit a huge, impenetrable wall. Groupon’s core business is a house of cards."

No, at the very best middlemen are a necessary evil — they don't add value, but they are a better way of allocating resources than the Soviet central planning model where the parasites are bigger and hungrier.

In Grouponzi's case, however, the parasitism is not even a necessary evil, as businesses find that a huge Groupon-driven sales spike is no compensation for taking a 75% haircut on sales.

I think you've went too far in claiming that middlemen create no value. Would you prefer living in a world where ALL purchases were direct from the manufacturer?

Groupon is a parasite, but that's from the con-game of running a loan-sharking business under the guise of advertising. Real middlemen, OTOH, take a material risk in order to provide a market for goods/services that they believe are actually underserved.

There will be tons of momos buying in the morning and it'll be nicely off the lows by lunch. Anyone who doesn't think we need a market clearing event to bring rationality back, that person is detached from reality.

The septic log known as FB will clog the system, as everyone jiggles the sell handle furiously, trying to unload their shares, only to watch in abject terror as the swirling scum rises in the bowl, inciting frantic calls to the plunger protection team.